Carbon markets: Time to listen to Indigenous Peoples and local communities

The Africa Climate Summit held in early September has largely been deemed a success, but it was not immune to challenges. The lead up to the summit was dogged by criticism that it had been coopted by Northern based philanthropies, NGOs and consultancies. This was underscored in a letter signed by over 400 Africa-based civil society groups.

As the other regional summits have proceeded, the question of whose voices are included is becoming a topic of interest and concern. While the crucial roles of Indigenous Peoples and local communities are increasingly recognized in addressing climate change and conserving biodiversity, they often remain peripheral to land management discussions amid accelerated global climate action.

It is the same in the case of carbon markets, where their role is no less significant, yet their voice and participation remain marginal. With the recent developments, challenges and volatility in these markets, we need to hear from the real partners on the ground.

This tumultuous year for carbon markets is due in part to transition pains triggered by progress under the Paris Agreement on Article 6, and to media articles that have questioned the value of voluntary market carbon credits. A necessary re-calibration is underway, with ‘high integrity’ becoming the new benchmark.

Voluntary markets and national commitments collide

Voluntary carbon markets, the spectrum of standards-setting bodies and associated private sector actors are trying to carve out a clear role and stake in the rapidly emerging carbon landscape.

Article 6 of the Paris Agreement permits countries to collaborate voluntarily in meeting their emission reduction goals outlined in their Nationally Determined Contributions (NDCs). As countries have independent strategies for realizing their NDCs, this could involve focusing on other sectors or otherwise result in a surplus of land-use sector carbon credits available for trading in domestic or international carbon markets. The sale and export of Verified Carbon Units by project developers understandably raises concerns around the implications of a country falling short of what are meant to be ever more rigorous NDC commitments.

In the Asia-Pacific region, some countries have paused voluntary carbon market project development and market engagement until they can fully assess and confidently engage, while developing a clear, strategic balance between their NDCs, Article 6 bilateral agreements and the voluntary carbon market. Throughout this transition, Indigenous Peoples and local communities are concerned about how, and under which modality, their interests are best served.

Voluntary carbon markets in transition towards integrity

In early 2023, The Guardian and Die Zeit newspapers claimed that over 90 percent of rainforest carbon credits issued by the world’s top certifier Verra had no value as they did not represent real carbon reductions. Verra and other industry experts have attempted to discredit the methodology used in the investigation. Despite rebuttals, the media coverage has resulted in anxiety in the markets, triggering some warranted self-reflection.

These media reports were among the factors that led to a decrease in the issuance and trading of nature-based carbon credits in 2023. In the previous two years, voluntary carbon markets reached record levels of trading. Although demand and transactions have slowly rebounded, trust and credibility in the voluntary carbon markets remain compromised.

Corporations still lack clear guidance on determining the characteristics and credibility of carbon credits, in comparison to the net zero approaches advanced by the Science-Based Targets Initiative. Until recent progress by the Integrity Council for the Voluntary Carbon Market and the Voluntary Carbon Markets Integrity Initiative, there has been no similar alignment on what high-integrity approaches to carbon credits should be. These integrity initiatives conduct multi-stakeholder forums which include actively soliciting the voices of Indigenous Peoples and local communities.

But more must be done to ensure that the voices of forest-based people are integral to the process. This may include creative approaches to engaging, communicating and interacting, as poor internet access and differences in cultural norms around decision-making processes and timelines may hinder meaningful, two-way collaboration.

Where Indigenous Peoples and local communities stand on carbon markets

Today, the voluntary carbon market, like many emerging markets, is fragile and volatile, yet optimistic. The trading of carbon as a commodity is uniquely complex, as the diversity of project types and complexity of social and ecological factors make one ton of carbon equivalent in one location, not fully interchangeable with a ton of carbon equivalent in another area.

Demand by corporates for offsets to drive their net zero targets is undiminished. However, their preferences are shifting from projects that avoid deforestation and associated carbon emissions to afforestation or reforestation projects with strong potential to remove carbon from the atmosphere.

Project developers and other stakeholders in voluntary carbon markets want to see the market survive, which at times may be at odds with the evolution of the Article 6 mechanism. But this should not detract from the important role of voluntary carbon markets as a means of developing tangible projects with targeted benefits to local stakeholders that will ultimately be nested within national accounting systems.

Indigenous Peoples and local communities express varying opinions and preferences when it comes to participating in carbon markets and engaging in carbon-related opportunities. While some are wary of commodifying nature, others see these markets as a lifeline to safeguard their lands, traditions and livelihoods. However, the most vocal discussions, particularly between carbon market supporters and critics, are often led by stakeholders from the Global North, sidelining the voices of the communities most directly affected.

An exception to this was an open letter published by Indigenous-led organizations in May 2023 in support of REDD+ (reducing emissions from deforestation and forest degradation). The letter explained why voluntary carbon markets remain an important and appreciated revenue stream for some of the world’s poorest forest dependent communities. Given the low profits for producers of many commodities in tropical Asian countries, such as approximately USD 162 per hectare per year for maize in Nan, Thailand according to RECOFTC’s assessments, even small flows of additional revenue to local communities can be transformative, offering alternatives to expand agricultural production.

Amplifying voices of Indigenous Peoples and local communities

As Pendi, a man who belongs to a community forestry group in Ciwidey, Indonesia told us: "Our forest is our life…For decades, we have worked so hard to keep them alive as they are our main livelihoods.”

“[Social forestry programs] have opened the way to partnerships with the private sector on forestry through which we have agreements to keep our forests safe and share benefits fairly,” he said. “By working together, building trust and creating a transparent financial process between all stakeholders, we can keep the sustainability of our forests.”

RECOFTC works hard to amplify the voices and interests of Indigenous Peoples and local communities. As a founding member of the Peoples Forests Partnership which backed the open letter, we continue to listen to communities and to discuss the role of carbon and forests as an important source of livelihood and benefits for them.

We do this through our involvement in networks and partnerships, through research and by ensuring that representatives of Indigenous Peoples and local communities can learn from and express their views at key events such as Asia Pacific Climate Week and conferences of parties to the UNFCCC.

RECOFTC is convinced that while voluntary carbon markets are imperfect, they can be an important tool in combatting climate change while also delivering transformative benefits to local communities. But this will require thoughtful design and appropriate social and environmental safeguards.

Indigenous Peoples and local communities can be their own strongest advocates. Project-level REDD+ through the voluntary carbon market can provide opportunities for them to exercise autonomy, build capacities and co-design projects. However, this is dependent on industry ‘integrity’, with respect not only to carbon accounting methodologies but also to robust social standards in the private sector and at different scales of governance. It requires ensuring free, prior and informed consent, based on a well-developed understanding of the full opportunities and risks of such projects while respecting and upholding the rights of Indigenous Peoples and local communities.

As we navigate towards sustainable forest landscapes and robust carbon markets, the deep-rooted wisdom, lived experiences and essential priorities of Indigenous Peoples and local communities are more than beneficial—they're indispensable.

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Regan Pairojmahakij is senior program officer for landscape collaboration in a changing climate and David Ganz is executive director at RECOFTC.

RECOFTC's work is made possible with the continuous support of the Swiss Agency for Development and Cooperation (SDC) and the Swedish International Development Cooperation Agency (Sida).